ADVERTISEMENT
Press release content from Business Wire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Business Wire
Press release content from Business Wire. The AP news staff was not involved in its creation.

FalconStor Software Announces Third Quarter of 2021 Results

November 10, 2021 GMT

AUSTIN, Texas--(BUSINESS WIRE)--Nov 10, 2021--

FalconStor Software, Inc. (OTCQB: FALC), the trusted data protection software leader modernizing disaster recovery and backup operations for the hybrid cloud world, today announced financial results for its third quarter, which ended on September 30, 2021, delivering a 35% year-over-year increase in subscription revenue fueled by the growth in managed service provider business and market adoption of hybrid cloud data protection solutions.

“We continue to make solid progress against our strategic plans to reinvent FalconStor and enable secure hybrid cloud backup and data protection,” said Todd Brooks, FalconStor CEO. “Driven by continued adoption of the FalconStor StorSafe long-term data protection solution, we accelerated our strategic focus on a recurring revenue model better aligned with today’s market. As part of this focus, we introduced a new and disruptive recurring monthly pricing model for our managed service providers, and continued migrating our installed based to a subscription revenue model. As a result, total subscription revenue increased 35% compared to Q3 of 2020, and 54% for the first nine months of 2021 compared to the same period last year.

ADVERTISEMENT

“While we are encouraged by our subscription revenue growth, we are continuing to work toward our goal of consistent total revenue growth, as total revenue decreased by 26% year-over-year during the quarter and is down 7% for the first nine months of 2021 compared to the same period in 2020. As the recurring percentage of total revenue continues to increase over the next several quarters, and the reduction in perpetual license sales decreases, we are committed to driving more predictable total revenue growth, delivering profitability, and generating cash from operations, as we invest to grow.

“Migration to the cloud, data center rationalization, and increased leverage of outsourced managed services are top priorities for enterprise CIOs in the post-pandemic world, and FalconStor plays a vital role in each,” added Brooks. “We are excited by our hybrid cloud focus, the efficient routes to market that we are building through our managed service provider partners, and trust our shareholders have placed in our team to deliver customer and shareholder value.”

Third Quarter 2021 Financial Results

ADVERTISEMENT

  • Subscription Revenue: 35% increase to $0.8 million, compared to $0.6 million in the third quarter of fiscal year 2020
  • Subscription Revenue % of Total Revenue: 23%, compared to 13% in the third quarter of fiscal year 2020
  • Total Revenue: $3.3 million, compared to $4.4 million in the third quarter of fiscal year 2020
  • Total Cost of Revenue: $0.4 million, compared to $0.4 million in the third quarter of fiscal year 2020
  • Total Operating Expenses: $2.4 million, compared to $2.3 million in the third quarter of fiscal year 2020
  • GAAP Net Income: $0.4 million, compared to $1.5 million in the third quarter of fiscal year 2020
  • Ending Cash: $3.5 million, compared to $0.9 million in the third quarter of fiscal year 2020

Nine Months Ended 2021 Financial Results

  • Subscription Revenue: 54% increase to $2.6 million, compared to $1.7 million in the first nine months of 2020
  • Subscription Revenue % of Total Revenue: 25%, compared to 15% in the first nine months of 2020
  • Total Revenue: $10.4 million, compared to $11.1 million in the first nine months of 2020
  • Total Cost of Revenue: $1.5 million, compared to $1.4 million in the first nine months of 2020
  • Total Operating Expenses: $8.6 million, compared to $7.9 million in the first nine months of 2020
  • GAAP Net Income: $0.4 million, compared to $1.2 million in the first nine months of 2020
  • Ending Cash: $3.5 million, compared to $0.9 million in the first nine months of 2020

Guidance

Given our less than anticipated year-to-date total revenue, we are revising the 2021 guidance we have previously provided.

 

Revised 2021 Guidance

Guidance (in $ millions) 

Low

High

Total Revenue 

$

14.1

$

15.1

Adjusted EBITDA* 

$

3.5

$

4.5

% 

 

25%

 

30%

Net Income 

$

0.6

$

1.7

% 

 

4%

 

11%

Rule of 40 (Revenue Growth % + Adjusted EBITDA %) 

 

20

 

33

*Adjusted EBITDA adds back Non-Operating and Other Expenses and Income

Conference Call and Webcast Information

WHO: Todd Brooks, Chief Executive Officer, FalconStor and Brad Wolfe, Chief Financial Officer, FalconStor

WHEN: Wednesday, November 10, 2021, 4:00 P.M. Central Time

To register for our earnings call, please click the following link:

FALCONSTOR THIRD QUARTER 2021 FINANCIAL TELECONFERENCE AND PRESENTATION

As an alternative, you can copy and paste the following link into your web browser to register:

https://register.gotowebinar.com/register/4614368145758035469

Conference Call:
Please dial the following if you would like to interact with and ask questions to FalconStor hosts:
Toll Free: 1-877-309-2074
Access Code: 342-776-416

Non-GAAP Financial Measures

The non-GAAP financial measures used in this press release are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The Company’s management refers to these non-GAAP financial measures in making operating decisions because they provide meaningful supplemental information regarding the Company’s operating performance. In addition, these non-GAAP financial measures facilitate management’s internal comparisons to the Company’s historical operating results and comparisons to competitors’ operating results. We include these non-GAAP financial measures (which should be viewed as a supplement to, and not a substitute for, their comparable GAAP measures) in this press release because we believe they are useful to investors in allowing for greater transparency into the supplemental information used by management in its financial and operational decision-making. The non-GAAP financial measures exclude (i) restructuring costs, (ii) effects of our Series A redeemable convertible preferred stock, and (iii) non-cash stock-based compensation charges and any potential tax effects. For a reconciliation of our GAAP and non-GAAP financial results, please refer to our reconciliation of GAAP to Non-GAAP financial measures presented in this release.

About FalconStor Software

FalconStor is the trusted data protection software leader modernizing disaster recovery and backup operations for the hybrid cloud world. The Company enables enterprise customers and managed service providers to secure, migrate, and protect their data while reducing data storage and long-term retention costs by up to 95%. More than 1,000 organizations and managed service providers worldwide standardize on FalconStor as the foundation for their cloud first data protection future. Our products are offered through and supported by a worldwide network of leading managed service providers (“MSPs”), systems integrators, resellers, and original equipment manufacturers (“OEMs”).

FalconStor and FalconStor Software are trademarks or registered trademarks of FalconStor Software, Inc., in the U.S. and other countries. All other company and product names contained herein may be trademarks of their respective holders.

Links to websites or pages controlled by parties other than FalconStor are provided for the reader’s convenience and information only. FalconStor does not incorporate into this release the information found at those links nor does FalconStor represent or warrant that any information found at those links is complete or accurate. Use of information obtained by following these links is at the reader’s own risk.

FalconStor Software, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

September 30, 2021

 

December 31, 2020

 

 

(unaudited)

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

3,474,784

 

 

$

1,920,656

 

Accounts receivable, net

 

2,285,117

 

 

2,836,571

 

Prepaid expenses and other current assets

 

1,537,267

 

 

1,837,596

 

Contract assets, net

 

169,835

 

 

254,483

 

Inventory

 

15,421

 

 

15,275

 

Total current assets

 

7,482,424

 

 

6,864,581

 

Property and equipment, net

 

193,028

 

 

197,020

 

Operating lease right-of-use assets

 

140,238

 

 

536,272

 

Deferred tax assets, net

 

310,755

 

 

330,552

 

Software development costs, net

 

14,345

 

 

19,278

 

Other assets, net

 

114,828

 

 

863,964

 

Goodwill

 

4,150,339

 

 

4,150,339

 

Other intangible assets, net

 

64,295

 

 

100,134

 

Contract assets

 

192,286

 

 

343,934

 

Total assets

 

$

12,662,538

 

 

$

13,406,074

 

Liabilities and Stockholders' Deficit

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

335,092

 

 

$

453,791

 

Accrued expenses

 

1,018,878

 

 

2,293,765

 

Operating lease liabilities

 

87,381

 

 

665,074

 

Short-term loan, net of debt issuance costs and discounts

 

 

 

3,320,863

 

Deferred revenue, net

 

3,709,005

 

 

4,603,270

 

Total current liabilities

 

5,150,356

 

 

11,336,763

 

Other long-term liabilities

 

637,099

 

 

703,889

 

Notes payable, net

 

2,150,574

 

 

754,000

 

Operating lease liabilities

 

53,430

 

 

 

Deferred tax liabilities, net

 

525,512

 

 

513,027

 

Deferred revenue, net

 

1,569,813

 

 

1,765,859

 

Total liabilities

 

10,086,784

 

 

15,073,538

 

Commitments and contingencies

 

 

 

 

Series A redeemable convertible preferred stock

 

14,075,434

 

 

12,940,722

 

Total stockholders' deficit

 

(11,499,680)

 

 

(14,608,186)

 

Total liabilities and stockholders' deficit

 

$

12,662,538

 

 

$

13,406,074

 

FalconStor Software, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2020

 

2021

 

2020

Revenue:

 

 

 

 

 

 

 

 

Product revenue

 

$

1,547,013

 

 

$

2,521,695

 

 

$

5,288,747

 

 

$

5,202,713

 

Support and services revenue

 

1,736,456

 

 

1,914,705

 

 

5,081,795

 

 

5,913,486

 

Total revenue

 

3,283,469

 

 

4,436,400

 

 

10,370,542

 

 

11,116,199

 

Cost of revenue:

 

 

 

 

 

 

 

 

Product

 

41,351

 

 

48,895

 

 

298,966

 

 

250,185

 

Support and service

 

400,934

 

 

367,063

 

 

1,233,067

 

 

1,109,379

 

Total cost of revenue

 

442,285

 

 

415,958

 

 

1,532,033

 

 

1,359,564

 

Gross profit

 

$

2,841,184

 

 

$

4,020,442

 

 

$

8,838,509

 

 

$

9,756,635

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development costs

 

711,273

 

 

600,430

 

 

2,032,360

 

 

1,809,354

 

Selling and marketing

 

1,610,635

 

 

1,026,241

 

 

4,267,010

 

 

3,027,372

 

General and administrative

 

633,954

 

 

358,701

 

 

2,129,921

 

 

2,297,451

 

Gain on litigation settlement

 

(632,600)

 

 

 

 

(632,600)

 

 

 

Restructuring costs

 

68,704

 

 

317,595

 

 

792,754

 

 

758,740

 

Total operating expenses

 

2,391,966

 

 

2,302,967

 

 

8,589,445

 

 

7,892,917

 

Operating income (loss)

 

449,218

 

 

1,717,475

 

 

249,064

 

 

1,863,718

 

Gain on debt extinguishment

 

 

 

 

 

754,000

 

 

 

Interest and other expense

 

(58,257)

 

 

(159,994)

 

 

(489,264)

 

 

(586,082)

 

Income (loss) before income taxes

 

390,961

 

 

1,557,481

 

 

513,800

 

 

1,277,636

 

Income tax expense (benefit)

 

16,529

 

 

11,272

 

 

63,804

 

 

44,709

 

Net income (loss)

 

$

374,432

 

 

$

1,546,209

 

 

$

449,996

 

 

$

1,232,927

 

Less: Accrual of Series A redeemable convertible preferred stock dividends

 

288,802

 

 

266,007

 

 

848,898

 

 

812,362

 

Less: Accretion to redemption value of Series A redeemable convertible preferred stock

 

13,517

 

 

175,335

 

 

285,814

 

 

366,566

 

Net income (loss) attributable to common stockholders

 

$

72,113

 

 

$

1,104,867

 

 

$

(684,716)

 

 

$

53,999

 

Basic net income (loss) per share attributable to common stockholders

 

$

0.01

 

 

$

0.19

 

 

$

(0.11)

 

 

$

0.01

 

Diluted net income (loss) per share attributable to common stockholders

 

$

0.01

 

 

$

0.19

 

 

$

(0.11)

 

 

$

0.01

 

Weighted average basic shares outstanding

 

6,990,723

 

 

5,919,837

 

 

6,324,370

 

 

5,919,773

 

Weighted average diluted shares outstanding

 

7,039,421

 

 

5,959,385

 

 

6,324,370

 

 

5,943,794

 

FalconStor Software, Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2020

 

2021

 

2020

GAAP income (loss) from operations

 

$

449,218

 

 

$

1,717,475

 

 

$

249,064

 

 

$

1,863,718

 

Non-cash stock option expense (1)

 

4,916

 

 

3,822

 

 

$

14,084

 

 

$

11,392

 

Restructuring costs (3)

 

68,704

 

 

317,595

 

 

792,754

 

 

758,740

 

Gain on litigation settlement (5)

 

$

(632,600)

 

 

$

 

 

$

(632,600)

 

 

$

 

Non-GAAP income (loss) from operations

 

$

(109,762)

 

 

$

2,038,892

 

 

$

423,302

 

 

$

2,633,850

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) attributable to common stockholders

 

$

72,113

 

 

$

1,104,867

 

 

$

(684,716)

 

 

$

53,999

 

Non-cash stock option expense, net of income taxes (2)

 

4,916

 

 

3,822

 

 

14,084

 

 

11,392

 

Restructuring costs (3)

 

68,704

 

 

317,595

 

 

792,754

 

 

758,740

 

Gain on litigation settlement

 

(632,600)

 

 

 

 

(632,600)

 

 

 

Gain on debt extinguishment

 

 

 

 

 

(754,000)

 

 

 

Effects of Series A redeemable convertible preferred stock (4)

 

302,319

 

 

441,342

 

 

1,134,712

 

 

1,178,928

 

Non-GAAP net income (loss) attributable to common stockholders

 

$

(184,548)

 

 

$

1,867,626

 

 

$

(129,766)

 

 

$

2,003,059

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

87

%

 

91

%

 

85

%

 

88

%

Non-cash stock option expense (1)

 

0

%

 

0

%

 

0

%

 

0

%

Non-GAAP gross margin

 

87

%

 

91

%

 

85

%

 

88

%

GAAP gross margin - Product

 

97

%

 

98

%

 

94

%

 

95

%

Non-cash stock option expense (1)

 

0

%

 

0

%

 

0

%

 

0

%

Non-GAAP gross margin - Product

 

97

%

 

98

%

 

94

%

 

95

%

 

 

 

 

 

 

 

 

 

GAAP gross margin - Support and Service

 

77

%

 

81

%

 

76

%

 

81

%

Non-cash stock option expense (1)

 

0

%

 

0

%

 

0

%

 

0

%

Non-GAAP gross margin - Support and Service

 

77

%

 

81

%

 

76

%

 

81

%

 

 

 

 

 

 

 

 

 

GAAP operating margin

 

14

%

 

39

%

 

2

%

 

17

%

Non-cash stock option expense (1)

 

%

 

%

 

%

 

%

Restructuring costs (3)

 

2

%

 

7

%

 

8

%

 

7

%

Non-GAAP operating margin

 

16

%

 

46

%

 

10

%

 

24

%

 

 

 

 

 

 

 

 

 

GAAP Basic EPS

 

$

0.01

 

 

$

0.19

 

 

$

(0.11)

 

 

$

0.01

 

Non-cash stock option expense, net of income taxes (2)

 

0.00

 

 

0.00

 

 

0.00

 

 

0.00

 

Restructuring costs (3)

 

0.01

 

 

0.05

 

 

0.13

 

 

0.13

 

Gain on litigation settlement (5)

 

(0.09)

 

 

0.00

 

 

(0.10)

 

 

0.00

 

Gain on debt extinguishment (6)

 

0.00

 

 

0.00

 

 

(0.12)

 

 

0.00

 

Effects of Series A redeemable convertible preferred stock (4)

 

0.04

 

 

0.08

 

 

0.18

 

 

0.20

 

Non-GAAP Basic EPS

 

$

(0.03)

 

 

$

0.32

 

 

$

(0.02)

 

 

$

0.34

 

 

 

 

 

 

 

 

 

 

GAAP Diluted EPS

 

$

0.01

 

 

$

0.19

 

 

$

(0.11)

 

 

$

0.01

 

Non-cash stock option expense, net of income taxes (2)

 

0.00

 

 

0.00

 

 

0.00

 

 

0.00

 

Restructuring costs (3)

 

0.01

 

 

0.05

 

 

0.13

 

 

0.13

 

Gain on litigation settlement (5)

 

(0.09)

 

 

0.00

 

 

(0.10)

 

 

0.00

 

Gain on debt extinguishment (6)

 

0.00

 

 

0.00

 

 

(0.12)

 

 

0.00

 

Effects of Series A redeemable convertible preferred stock (4)

 

0.04

 

 

0.07

 

 

0.18

 

 

0.20

 

Non-GAAP Diluted EPS

 

$

(0.03)

 

 

$

0.31

 

 

$

(0.02)

 

 

$

0.34

 

 

 

 

 

 

 

 

 

 

Weighted average basic shares outstanding (GAAP and Non-GAAP)

 

6,990,723

 

 

5,919,837

 

 

6,324,370

 

 

5,919,773

 

Weighted average diluted shares outstanding (GAAP)

 

7,039,421

 

 

5,959,385

 

 

6,324,370

 

 

5,943,794

 

Weighted average diluted shares outstanding (Non-GAAP)

 

6,990,723

 

 

5,959,385

 

 

6,324,370

 

 

5,943,794

 

Footnotes:

  (1)

 

Represents non-cash, stock-based compensation charges as follows:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2020

 

2021

 

2020

Cost of revenue - Product

 

$

232

 

 

$

 

 

$

688

 

 

$

 

Cost of revenue - Support and Service

 

185

 

 

104

 

 

549

 

 

310

 

Research and development costs

 

167

 

 

433

 

 

167

 

 

1,289

 

Selling and marketing

 

2,915

 

 

186

 

 

8,475

 

 

554

 

General and administrative

 

1,417

 

 

3,099

 

 

4,205

 

 

9,239

 

Total non-cash stock based compensation expense

 

$

4,916

 

 

$

3,822

 

 

$

14,084

 

 

$

11,392

 

(2)

 Represents the effects of non-cash stock-based compensation expense recognized, net of related income tax effects. For the three and nine months ended September 30, 2021 and 2020, the tax expense for both GAAP and Non-GAAP basis approximate the same amount.

(3)

Represents restructuring costs which were incurred during each respective period presented.

(4)

Represents the effects of the accretion to redemption value of the Series A redeemable convertible preferred stock, accrual of Series A redeemable convertible preferred stock dividends and deemed dividend on Series A redeemable convertible preferred stock.

(5)

Represents a gain for the legal settlement of a contractual dispute with a marketing/sales firm.

(6)

Represents the gain recorded when the Company's loan with the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act was forgiven on March 30, 2021.

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20211110005644/en/

CONTACT: Brad Wolfe

Chief Financial Officer

FalconStor Software Inc.

investorrelations@falconstor.com

CONTACT US AROUND THE GLOBE

Corporate Headquarters

501 Congress Avenue

Suite 150

Austin, Texas 78701

Tel: +1.631.777.5188

salesinfo@falconstor.comEurope Headquarters

Landsberger Strasse 302

Munich, Germany

Tel: +49 (0) 89.41615321.10

salesemea@falconstor.com

KEYWORD: TEXAS UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: NETWORKS INTERNET DATA MANAGEMENT TECHNOLOGY SOFTWARE

SOURCE: FalconStor Software, Inc.

Copyright Business Wire 2021.

PUB: 11/10/2021 04:30 PM/DISC: 11/10/2021 04:32 PM

http://www.businesswire.com/news/home/20211110005644/en